REAL WORLD

Corporate culture key to success with analytics

New research by MIT Sloan Management Review and the IBM Institute for Business Value reports that organizational challenges, more so than technology hurdles, are holding companies back from fully integrating analytics across their enterprises.

According to a global survey of more than 4,500 executives, managers and analysts from 120 countries and 30 industries, 44 percent of organizations say cultural barriers to enterprise-wide analytics adoption, such as the requirement for new leadership competencies and organizational resistance to new ideas, are the primary barriers. In contrast, only 24 percent point to technology concerns.

The report, entitled “Analytics: The Widening Divide,” builds on the findings from the original study by MIT SMR and IBM in 2010 to understand how companies are embedding analytics in more of the enterprise’s processes and operations. The 2010 study found organizations fall into one of three levels of sophistication: basic users referred to as “Aspirationals,” followed by the more “Experienced” users and the most advanced users referred to as “Transformed.” Year-to-year comparisons reveal that the more sophisticated users are expanding their deployment of analytics and widening the performance gap over their peers.

For instance, from 2010 to 2011 the percentage of respondents who cited a competitive advantage using analytics grew 23 percent for Transformed and 66 percent for Experienced organizations. These same organizations are more than twice as likely to substantially outperform their competitive peers. In contrast, Aspirational organizations lost ground in competitiveness, falling 5 percent since last year.

“Our new research shows that the early and aggressive adopters of analytics make significant gains in both performance and overall competitiveness,” says Fred Balboni, IBM’s global leader, Business Analytics and Optimization. “These indicators point to an urgent need for organizations to foster a data-oriented culture and drive an analytics strategy that embeds fact-based insights into decisions and processes at every level of the business.”

Sirius XM Radio turns up marketing volume with analytics

After 10 years of providing new-car owners boundless choices of entertainment and information, Sirius XM Radio is discovering used-car customer needs. Applying predictive analytics from SAS, the company is modeling customer behavior patterns, helping its decision-makers better tailor offers to this new market. In addition to reducing marketing costs through precise targeting, analytics help Sirius XM Radio serve the right message, to the right person, at the right time so they can grow subscribers and revenues. Initially, marketers expected new-car and used-car customer purchase behavior to look similar. But segmentation and predictive models quickly surfaced distinct differences – insights that guide the company in developing new marketing campaigns.

“Analytics influence business decisions when analytics pros understand the landscape and can share their findings with executives in that context,” says Kaiser Fung, VP of Strategic Analytics at Sirius XM Radio. “Especially when analytical intelligence conflicts with conventional wisdom, if we make the benefits clear, the numbers win over skeptics and significantly benefit the organization.”

Accel Partners launches $100 million ‘Big Data Fund’

Accel Partners, a global venture capital firm, recently launched its Big Data Fund, a new $100 million investment initiative created to identify innovative entrepreneurs seeking to build category-defining companies at every layer of the Big Data stack. Accel’s Big Data Fund aims to fund transformative companies throughout the Big Data ecosystem, from next generation storage and data management platforms to a wide range of revolutionary software applications and services, including data analytics, vertical applications, mobile and many more. Accel Partners will manage its Big Data Fund across global offices in the United States, London, China and India.

“Big Data consistently drives innovation across our existing portfolio companies today and with the Big Data Fund we are empowering a new set of entrepreneurs to be able to catch this wave,” says Ping Li of Accel Partners. “As Big Data platforms … continue to gain rapid adoption and become more mainstream, we are seeing an exciting wave of next generation business applications emerge. These new applications – whether they address business intelligence or mobile or collaboration – will harness Big Data to deliver unique value and business insight to enterprises and end users. Big Data is the future of IT and we believe Big Data will drive the next-generation of multi-billion dollar software companies.”

Are soft skills the ‘killer app’ of analytics?

In the current issue of Analytics, INFORMS’ online, outreach magazine, David Leonhardi explores the critical but often overlooked topic of “soft skills,” which he labels the “killer app for analytics.” A business strategist in Boeing Commercial Airplane’s Strategy Integration Group, Leonhardi outlines six abilities (design, story, symphony, empathy, play and meaning) that have a role in the “selling” process.

Making the sale is one thing, making an impact is another. In his Executive Edge column, Chris Fry, managing director of Strategic Management Solutions, examines why so many analytics projects fail to reach their full potential and offers three strategies to close the gap between analytics and action.

To read these and other articles in Analytics magazine, visit http://viewer.zmags.com/publication/7f1ab3ad#/7f1ab3ad/1.

Online marketplaces: risk, trust and social aspects

A new study of e-commerce giants eBay and Amazon challenges a common assumption that trust and risk are always important considerations for buyers in online marketplaces, arguing instead that auction sites may have “over-invested in institutional structures” to reduce buyers’ economic risk while ignoring social elements of their transactions.

It has been widely assumed that online auction sites always need to build trust and reduce risk, but a forthcoming article in Information Systems Research counters that it is not necessarily “the higher the better” for risk-reducing safeguards – which are costly for companies to build and maintain – because some buyers might view them as stifling good deals while others might not consider them at all.

The paper, co-authored by Paul Pavlou of Temple University’s Fox School of Business and David Gefen of Drexel University’s LeBow College of Business, both in Philadelphia, analyzed data from 398 buyers on eBay’s and Amazon’s marketplaces to gauge buyers’ assessments of online safeguards, such as escrow services, feedback mechanisms and market rules.

The authors argue that the primary factors buyers consider when making purchases online are risk (potential economic loss) and trust (social norms with sellers). Pavlou and Gefen state that auction safeguards generally guard against risk and ignore elements of trust. But when typical buyers make online purchases, as long as there is some level of security – such as credit card guarantees – they really care about whether or not they can trust the community of sellers.

The “sharp distinction” between what marketplace providers guard against and what buyers deem as important indicates “that institutional structures in today’s online marketplaces focus on tangible assurances aimed at reducing the buyers’ economic vulnerability and not on the intangible aspects of the transaction that aim at reducing their social vulnerability,” according to the study.

The authors found that risk is only a significant consideration for buyers using marketplaces with moderate levels of safeguards. In unsafe markets, buyers are simply unwilling to transact. In very safe markets, the chance of risk is so low that economic loss isn’t even a concern.

Pavlou and Gefen state that online transactions, while primarily an economic exchange, also have intangible social rules of conduct, such as reciprocal favors in current or future transactions, and long-term relationship building. “Although this may imply that online marketplaces have correctly recognized that buyers focus on economic losses in their transaction decision-making process, perhaps they have done so at the expense of ignoring relevant social aspects,” the authors wrote.

2012 Innovation in Analytics Award

The Analytics Section of INFORMS is seeking nominations for its newly created “Innovation in Analytics Award” to be presented at the 2012 INFORMS Conference on Business Analytics & Operations Research in Huntington Beach, Calif., April 15-17, 2012.

Nominations/applications are due Jan. 31, 2012.

The purpose of the Innovation in Analytics Award is to recognize creative and unique developments, applications or combinations of analytical techniques. For more information, visit www.informs.org/Community/Analytics/News-Events.